Better Than Expected Jobs Data Lifts Dow To New Record High - U.S. Commentary

3/8/2013 4:24 PM ET

With an upbeat employment report adding to optimism about the economy, stocks moved mostly higher over the course of the trading day on Friday. Buying interest was somewhat subdued, however, as some traders feel the recent upward move by the markets has been overdone.

The major averages ended the day firmly in positive territory, with the Dow once again setting a new record closing high. The Dow rose 67.58 points or 0.5 percent to 14,397.07, the Nasdaq climbed 12.28 points or 0.4 percent to 3,244.37 and the S&P 500 advanced 6.92 points or 0.5 percent to 1,551.18.

The gains on the day contributed to strong weekly advances by the major averages. The Nasdaq surged up by 2.4 percent, while the Dow and the S&P 500 both jumped by 2.2 percent.

The strength on Wall Street came on the heels of the release of a report from the Labor Department showing stronger than expected job growth in the month of February.

The Labor Department said non-farm payroll employment rose by 236,000 jobs in February compared to economist estimates for an increase of about 171,000 jobs.

With the continued job growth, the unemployment rate dipped to 7.7 percent in February from 7.9 percent in January, falling to its lowest level since December of 2008.

Sal Guatieri, Senior Economist at BMO Capital Markets, said, "Looking past the fiscal drag and political uncertainty, American companies are hiring again in greater numbers."

"Employment should strengthen further as the fiscal fog clears and companies see sustained strength in consumer spending and housing activity," he added.

Upbeat economic data from overseas also generated some positive sentiment, with a report from Japan's Cabinet Office showing that the Japanese economy stabilized in the fourth quarter after seeing modest contractions in the two previous quarters.

A separate report from the Chinese General Administration of Customs showed an unexpected Chinese trade surplus in the month of February.

Sector News

Railroad stocks showed a strong move to the upside over the course of the trading day, resulting in a 1.4 percent gain by the Dow Jones Railroads Index. With the gain, the index climbed back toward the record closing high that it set on Wednesday.

FreightCar America (RAIL) and Norfolk Southern (NSC) turned in two of the railroad sector's best performances, advancing by 2.3 percent and 1.9 percent, respectively.

Considerable strength was also visible among airline stocks, as reflected by the 1.2 percent gain posted by the NYSE Arca Airline Index. The gain extended a recent upward move by the index, which reached a nearly six-year closing high.

Chemical, health insurance, and defense stocks also saw notable strength on the day, while most of the other major sectors showed more modest moves to the upside.

The major European markets also moved to the upside on the day. While the French CAC 40 Index advanced by 1.2 percent, the U.K.'s FTSE 100 Index and the German DAX Index rose by 0.7 percent and 0.6 percent, respectively.

In the bond market, treasuries moved sharply lower following the better than expected jobs report. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 6.5 basis points to an eleven-month closing high of 2.056 percent

Looking Ahead

While the economic calendar for next week starts off relatively light, a slew of data is scheduled to be released beginning on Wednesday.

Traders are likely to keep a close eye on the release of reports on retail sales, industrial production, and producer and consumer price inflation.